The Digital Revolution in Industrial Real Estate

The factories and warehouses of today are changing swiftly with rapid advances in tech reshaping the manufacturing and supply chain models of tomorrow.

The factories and warehouses of today are changing swiftly with rapid advances in tech reshaping the manufacturing and supply chain models of tomorrow.

Key Drivers in Industry 4.0

There is no doubt that demanding expectations of millennial consumers is a key driver of Industry 4.0. Consumers want information available on demand 24/7. They want to be engaged digitally by products and services - and bespoke highly personalised products at that; they are in search of a delightful shopping experience and the convenience of fast, same/ next day deliveries. That has accelerated the fusion between the physical, digital and human interface, along with the global megatrends of urbanisation and the explosion of mega-cities that will boost demand for industrial real estate in Asia.

What it means for Industrialists

Rapid advancements in robotics, info tech will eventually lead to a drop in the investment cost of Industry 4.0. Higher productivity levels from greater output efficiency will mean that Industry 4.0-enabled factories will no longer require as large a footprint as their mass manufacturing brethren. Competition for high-spec factories with relevant infrastructure will get keener. Early engagement with landlords in premises planning will be a critical success factor for industrialists looking to transition to Industry 4.0.

What it means for Investors

Open innovation is pivotal to avoiding obsolescence in the age of Industry 4.0. Landlords need to incorporate early feedback into their existing facilities to future proof their portfolio. Early adopters are likely to enjoy rental premiums of up to 18% above prevailing market rents as a result of the cost efficiencies enjoyed by industrialists.

Micro Trend Disruptors

The Industry 4.0 ecosystem is already attracting an army of start-ups which offer cost effective and innovative solutions to manufacturers of all sizes to increase productivity and satisfy the expectations of an increasingly demanding consumer market. High dependence on automation and robotics will require reliable and uninterrupted access to critical infrastructure such as power, internet and water supply. The factories and warehouses of the future will therefore require modular features to adapt quickly to the new micro trends that will have a phenomenal influence on data, computing and connectivity, analytics and intelligence, human-machine interactions and the digital to physical production.

This is the first of a series of five in CBRE’s “Digital Revolution of Industrial Real Estate” that deep dives into trends that will redefine current manufacturing and supply chain models.

In our next instalment, we explore how data, computing and connectivity all come together to transform operational efficiencies for industrialists.